Investing.com — Nvidia’s recent share weakness is puzzling given the strength of near-term expectations, according to Morgan Stanley, which says investors are asking why the stock has lagged despite a “very robust AI environment.”
Morgan Stanley analyst Joseph Moore said they have been “somewhat surprised at Nvidia's underperformance YTD after a weak close to 2025,” noting that one of the most common investor questions has been what is driving the pullback and how those overhangs will be resolved in 2026.
The firm stated that its “checks remain very strong, and getting stronger,” and highlighted that bullish earnings assumptions are already widespread.
Morgan Stanley is hearing “references to $9+ in earnings power this year, vs. consensus $7.75,” making near-term upside “highly likely.”
The bank argued that several concerns weighing on sentiment are overstated. It said “the number of AI beneficiaries are broadening out” as demand surges and supply shortages spread across the sector.
Some investors are also focused on financing for frontier model developers and “NVIDIA's role in that financing,” which Morgan Stanley stated requires “some adjustment.”
Concerns around competitive dynamics with ASICs and AMD persist but are “overblown,” the firm believes.
A key catalyst, according to Morgan Stanley, will be the upcoming Vera Rubin platform, which should offer a “strong demonstration of NVIDIA's leadership” and help address share concerns.
“The bottom line is that we see the stock outperforming from here,” Moore wrote, adding that Nvidia still faces a “wall of worry to climb” but is positioned to move past it.
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